I have a confession to make: we own a timeshare.

Now before you berate me for having no business sense in buying a timeshare, let me say that it is with one of the best hotel brands in the world, we bought in a location that we intend to use every year (as opposed to buying as an investment, or to trade into other properties), we’ve been very happy with it and after six years have no regrets with our purchase.  I think they are particularly valuable for families with small kids like ours, where a kitchen and a large living space are important.

But before we get into timeshares, lets diverge for a second and talk about Ben Horowitz.  The venture capitalist recently wrote an article titled When Employees Misinterpret Managers, with an amusing tale of how in a previous company he changed his salespeople’s incentive plan to try and flatten out each quarter’s sales bookings, since everything seemed to get booked the last few days of the quarter.  Unfortunately, his fix of providing incentives for salespeople to close sales in the first 2 months of the quarter had the wrong effect – instead of getting the sales closed earlier in the quarter, the opposite happened: the last month’s sales were being held by the salespeople to close at the beginning of the next quarter!

So what does this have to do with timeshares?   One of the biggest objectives of a timeshare property is, well, to sell you a timeshare.  This objective applies whether you already own a timeshare – because there are always more weeks in the year to purchase – or whether you are a first-time guest to the property and not yet an owner.

So how do they get you to buy a timeshare, you ask?

These are smart people.  First, when you check-in they refer you to the concierge for your “welcome gift” – typically a beach bag or something similar, but nice enough that you would actually want to use it.  When you pickup your gift, the concierge tries to sign you up for a meeting, providing a financial incentive of maybe $100 (or comparable award points) to attend.  They are very, very well trained, implying a sense of urgency with limited capacity for these meetings and a suggestion just to get something on the calendar now, even if you need to change it later.  If you are an owner, they call these meetings an “owner’s update”, which is billed as a chance to hear about new properties in the system but the reality as everyone knows is that the meeting is their opportunity to try and sell you another timeshare.  But hey, they are paying you, and as an owner you are often genuinely interested in hearing about updates to their properties.  (I don’t have proof of this, but I’m willing to be that the concierge gets a bonus for each person they get to signup for a meeting.)

We have gone to a number of these meetings over the years, with our hotel company and some others, and I’ve identified a problem with their strategy: They don’t differentiate enough between their sales approach to first-time guests versus current owners.

With a first-time guest to the property, they can have a short-term view.  It may be their only chance to sell them, so you can make the sales pitch as hard as you want, always having another incentive to pull out of the bag to try and extend the meeting and close the deal.  Frankly, if the sales pitch is too strong and the guest leaves unhappy, the company hasn’t really lost anything – they weren’t an owner before, and they still aren’t now.

But with owners it’s different.  I already own a property.  I like it.  When I’m ready to buy again, I will most likely buy with the same company (in the same location or in a different location, but either is a win for the company).   You’re welcome to try and persuade me with incentives to buy today, but you can’t have me leaving the meeting disgusted with the sales tactics.   The worst tactic, which we just experienced, was where you think the meeting is over and you’re handed off to someone who you are told “wants to ask you a few final questions about your meeting to make sure you were treated appropriately”.   I guess that would be okay – if it wasn’t an outright lie and this new person’s goal was just to continue the sales process with more questions.

The problem lies in the disconnection between the company’s long-term objectives, and the short-term compensation model for their sales people. The sales people get no credit unless they close the deal today, and therefore they view it as their only chance and don’t care if I leave unhappy – they’ll never see me again.  The company though wants me to be a lifelong owner, so they should have a compensation model for the salespeople that aligns their longer-term objectives and keeps me a happy owner – which I am currently not, based on my last meeting.

Conclusion

I had a colleague once who ran an office with a bonus plan calculated off of gross revenues.  It should be no surprise that the company’s margins were suffering – the compensation plan rewarded growing revenues, regardless of what the cost of goods sold was.  Management kept pressuring for margin improvements, but across the company they weren’t changing.  His response to me was simple: “Margins will improve when the company ties them to our bonus plan.”

If you want to get the results you hope for, whether you selling timeshares, software, or anything else, make sure you are aligning your compensation plans accordingly.

Photo from Flicr user moogs